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Mr. Michael Keen, Ian W.H. Parry, and Mr. James Roaf

rate equal to the difference between domestic and any foreign carbon prices, and symmetrically for exports, would fully adjust for differences in carbon prices. For imports from a jurisdiction without carbon pricing or other mitigation policies, such a charge means the foreign producer faces the same transfer payment component (T in the diagrams above) as a domestic producer with the same emissions intensity. Similarly, including export rebates in the BCA will put the domestic producer on level terms with foreign producers in the external market. The competitiveness